Unexplained cash credit under section 68 sustained where lender's bank account showed cash deposits and creditworthiness was not proved.

Unsecured loan receipts may be treated as unexplained cash credit where the creditor's bank account shows substantial cash deposits immediately before issuing cheques, and the assessee fails to prove the creditor's creditworthiness and the genuineness of the transaction. Mere payment through account payee cheques does not discharge the burden under section 68. A challenge based on lack of jurisdiction and violation of natural justice failed because no supporting material was produced and the record showed adequate opportunity and consideration of the assessee's submissions.

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Issues: (i) Whether the addition made under section 68 of the Income-tax Act, 1961 in respect of the unsecured loan received from M/s Raj Associates was sustainable; and (ii) whether the impugned orders were bad in law for want of jurisdiction and violation of natural justice.

Issue (i): Whether the addition made under section 68 of the Income-tax Act, 1961 in respect of the unsecured loan received from M/s Raj Associates was sustainable.

Analysis: The creditor was identifiable and had responded to the notice issued under section 133(6) of the Income-tax Act, 1961, but the material on record showed substantial cash deposits in its bank account immediately before issuance of cheques to the assessee. The creditor had negligible capital, no meaningful business receipts, and the assessee failed to produce evidence establishing the creditor's creditworthiness and the genuineness of the transaction. Mere payment through account payee cheques did not, by itself, discharge the onus under section 68 of the Income-tax Act, 1961.

Conclusion: The addition under section 68 of the Income-tax Act, 1961 was justified and was rightly sustained against the assessee.

Issue (ii): Whether the impugned orders were bad in law for want of jurisdiction and violation of natural justice.

Analysis: The assessee did not place any material to support the plea of lack of jurisdiction. The record also showed that adequate opportunities were granted during the assessment and appellate proceedings, and the submissions and material furnished by the assessee were considered before the orders were passed.

Conclusion: The grounds challenging the orders on jurisdictional and natural justice grounds were not accepted.

Final Conclusion: The assessee failed to discharge the burden required to explain the unsecured loan under section 68, and the appellate challenge to the orders was unsuccessful.

Ratio Decidendi: Where cash is deposited in the lender's bank account immediately before issuance of loan cheques and the assessee fails to establish creditworthiness and genuineness, the unsecured loan may be treated as unexplained cash credit under section 68 notwithstanding payment through banking channels.

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